Tuesday, July 27, 2010

David Cameron India visit::Quest for an enhanced partnership

David Cameron’s decision to make India one of his first diplomatic engagements outside the United Kingdom and meet Prime minister Manmohan Singh this week indicates his seriousness of purpose

When UK’s new Prime Minister David Cameron and nearly half his senior cabinet colleagues set foot in New Delhi, it is expected to mark the beginning of a new chapter in Indo-British bilateral relations.

It will be the beginning of Cameron’s quest for an “enhanced partnership” with India. As soon as he assumed office in the first week of May, Cameron made it clear that India would be one of the key focus areas of the new government.

In the Queens’s address to the two Houses of Parliament on May 25, India was the only country that was mentioned in terms of Britain’s bilateral relations. The Queen’s Speech (delivered to the first session of Parliament each year), written by the government, read, “My government looks forward to an enhanced partnership with India.”

This was later elaborated by No. 10 Downing Street: “The Government is committed to an enhanced partnership with India as an emerging global power, one that reflects our deep and historic ties and recognises India’s strategic importance.”

When Cameron and his team engage in bilateral talks with Prime Minister Manmohan Singh and his colleagues in New Delhi, some of the key issues expected to come up are economic and trade relations between the two countries, Britain’s and India’s role in the global economic framework that has taken the form of the G-20 in the last few years, and their role in Afghanistan where Britain has committed troops while India’s role has been non-combative. Another key issue that could be discussed is Britain’s new cap on immigration, which would restrict the number of non-EU workers coming into the country. Cameron and Singh will have a handful of issues to discuss, with little time for a ceremonial guided tour of the Taj Mahal.

Many in the newly elected Tory-Lib Dem coalition government have been very critical of how the previous Labour government had handled UK’s relationship with India during its 13-year reign. While diplomatic relations between India and Britain had been cordial for the most part, economic indicators at the ground level point in the other direction. In the last 10 years, Britain has slipped from being India’s fourth biggest source of imports to the 18th position. Foreign direct investment from Britain into India has fallen steadily in the last five years, even though India Inc was aggressively active in Britain during this period.

The Tata Group made ambitious and impressive M&A forays in the UK, the highlights of this seemingly one-sided love affair being the acquisition of steel maker Corus and later Jaguar Land Rover. According to the latest report for 2009-10 released by UK Trade & Investment, India is the fourth largest investor in the UK, ahead of Germany and China but behind only US, Japan and France.

If there is one point on which members on both sides of the House agree, it is this: Britain needs to start treating India as an economic powerhouse of tomorrow and that Britain has more to gain from a vibrant economic relationship with India. Alok Sharma, Tory MP from Reading, says, “This relationship has changed. It is a relationship of equals [now]. Going forward, India and China could become first among equals.” Cameron’s decision to make India one of his first diplomatic engagements outside the UK suggests that his administration is ready to put its money where its mouth is.

While Britain is still one of the few western powers that is backing India’s bid for a permanent seat in the UN Security Council, a support reiterated by the current government, there is also a call for elevating India’s position from a G-20 member to a G-8 member. Some even argue that multiple global economic institutions should be done away with. Keith Vaz, Labour MP from Leicester East, believes that a multiplicity of such institutions is futile. “India today is so powerful that it need not count UK anymore,” says Vaz, whose family traces its roots to Goa. He adds, “UK cannot do business outside the EU without India.”

In that context two recent moves by the UK government can damage its aspirational relationship with India: First, the decision to put a cap on non-EU immigration, which will restrict the inflow of workers to 24,100 a year; and second, UK’s proposal to cut development aid to India.

UK has historically been one of the most desirable destinations for students and doctors from India. Vaz’s elder sister and newly elected MP from Walsall South, Valerie Vaz, argues that Britain must encourage more doctors from India to work in UK’s National Health Service. Further, Britain’s universities need Indian students as much as the students need access to top-quality education in UK. After all, Manmohan Singh himself is a product of Oxbridge.

Britain too has big expectations from India. Some of the sectors that Britain counts as its core sectors — such as financial services, retail and education — remain tightly controlled in India. “Market access in India in the areas that are key to Britain is still not very easy,” says Jo Johnson, Tory MP from Orpington and former New Delhi-based South Asia Bureau chief for the Financial Times.

MPs from the Labour camp argue that the Tory claim about a neglected Indo-British relationship under the Labour regime is inaccurate and a theory spun for its convenience. Keith Vaz says that the institutional framework can help the bilateral relationship only at a broad level. What really clinches the deal at the end of the day is the warm personal relationship between the two countries at the leadership level. On that account it is claimed that former Prime Minister Gordon Brown and Manmohan Singh shared a special chemistry, something 43-year old Cameron will have to start working on with his 77-year old Indian counterpart.

Labour MP Virendra Sharma believes that historically, it is Labour rather than the Tories that has been closer to the Congress Party. As a case in point, Keith Vaz recollects David Miliband staying at Rahul Gandhi’s house during one visit to India.

Whether this “enhanced partnership” will be achieved through bilateral institutions or personal chemistry between the leaders or, better still, a combination of these two, will have to be seen after Cameron returns home after meeting Manmohan Singh. Johnson says, “The world cannot change with a three-day trip. This (Cameron’s) visit to India has to be seen as a signal of intent.”

The best place to start, he says, is to set trade targets, investment targets and two-way FDI targets, and both countries must identify sectors where the seeds of this enhanced relationship can be planted.